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Morning Briefing Strap Line
Tue 24th May 2022 - Update: TRG, SSP and Shaftesbury
TRG reports Wagamama like-for-likes up 15% year to date, concessions business shows strong recovery, food and drink inflation set to be 10% this financial year: The Restaurant Group (TRG) has reported a strong performance with Wagamama like-for-like sales up 15% on 2019 levels in the year to date. TRG said Wagamama like-for-likes were up 18% in the first quarter and by 11% in the second quarter to date, despite the latest quarter seeing a return to the 20% VAT rate. TRG said this represented a year to date outperformance of the market of 9%. For the 19 weeks ending 15 May 2022, like-for-like pub sales are up 10% on pre-covid levels – 12% in the first quarter and 6% in the second quarter to date. The business said this represented an outperformance of the market of 11% in the year to date. The leisure business reported like-for-like sales up 6% in the year to date – 8% in the first quarter and 4% in the second quarter to date, which was “in line” with the market. TRG said its concessions recovery accelerating with total FY22 sales anticipated to be at least £100m. On the back of this strong recovery, management now expects to have the entire concessions estate of 41 sites trading by July. Like-for-like sales in the year to date are down 20% on 2019 levels – down 26% in the first quarter but recovering to minus 11% in the second quarter to date, which TRG said represented a 12% outperformance of the market. The company stated: “Good progress has been made on Wagamama new site expansion plans with at least eight restaurants and three delivery kitchens expected to open in FY22. Our new site pipeline for our pubs business remains on track with three new pubs expected to open in FY22. The continued strength of trading of these businesses has reinforced our belief in their long-term roll-out potential. In-line with cost pressures experienced across the sector that have been exacerbated by the war in Ukraine, food and drink inflation is now expected to be around 9% to 10% in FY22, versus the 5% outlined at the time of the group’s full-year results in March. TRG will continue to work with our supply chain partners to mitigate some of this increased impact, but this remains a volatile inflationary market: Given continued trading outperformance, the group’s financial position has improved, with net debt reducing by approximately £6m since the year-end and cash headroom in excess of £220m. The group has flexibility both to invest in growing the business and reducing leverage over the medium-term. Management’s current expectations for FY22 remain unchanged, with continued robust trading in our Wagamama and pubs businesses and the stronger recovery in concession sales offsetting the increased food and drink inflationary impact in FY22.”

Number of Italian concepts set to join updated Premium Database of Multi-Site Companies: A number of Italian concepts are among the 42 new multi-site companies being added to the next edition of the Propel Premium Database of Multi-Site Companies, which will be released on Friday (27 May), at midday. The updated Propel Multi-Site Database, which is produced in association with Virgate, features London-based pizza company Made of Dough, which was founded in 2014 by Ed Sandeman, Henry Amodio and Harry Gibson, and has recently opened its third site, an Italian bar and all-day diner called Palazzo in London. Also added this month is Altrincham-based Italian restaurant concept Sugo Pasta Kitchen, which is co-owned by Alex De Martiis, Michael De Martiis and Jonny Marcogliese, and operates sites in Altrincham, Ancoats in Manchester, and its latest site in Sale. Meanwhile, Leicestershire-based operators Roberto Isella and Liberato Mazza, whose portfolio includes Timo restaurant and wine bar in Stoneygate, Leicester and Ferarri – an Italian trattoria in Quorn, which the duo recently purchased, will be featured. Premium subscribers will also receive a 3,212-word report on the new additions to the database. The comprehensive database is updated monthly and provides company names, the people in charge, how many sites each firm operates, its trading name and its registered name at Companies House if different. It features more than 2,000 companies. Premium subscribers will also receive the next edition of the New Openings Database, which is produced in association with StarStock, on Friday, 3 June at midday. It focuses on newly announced openings and upcoming launches in the sector and is updated every month. The next edition also includes a 12,000-word report on the new additions to the database. Premium subscribers also receive access to the Propel Turnover & Profits Blue Book, which is produced in association with Mapal Group. The Blue Book, which is also updated monthly, provides an insight into UK operator turnover and profitability over five years, profit conversion and directors’ earnings. Premium subscribers also get exclusive access to the UK Food and Beverage Franchisor Database, which is an exhaustive guide to the companies offering a food and beverage franchise in the UK and will be updated every two months. The second edition, which was sent on Friday (20 May), features 120 companies, providing insight on the offer, locations, cost and other key details. The second edition provides almost 47,000 words of content. Companies can now have an unlimited number of people receive access to Propel Premium for a year for £895 plus VAT – whether they are an operator or a supplier. The single subscription rate is £445 plus VAT for operators and £545 plus VAT for suppliers. Email jo.charity@propelinfo.com to upgrade your subscription. Subscribers also receive access to Propel’s library of lockdown videos and Friday Wrap interviews and now also have access to a curated video library of the sector’s finest leaders and entrepreneurs, offering their insights on running outstanding businesses in the sector. Premium subscribers also receive their morning newsletter 11 hours early, at 7pm the evening before our 6am send-out; regular video content and regular exclusive columns from Mark Wingett.

SSP Group reports sales back to 82% of pre-covid levels in UK: UK-based transport hub foodservice specialist SSP Group has reported sales in the past six weeks are at 82% of pre-covid levels driven by the rapid recovery in leisure travel. The company stated: “The continued improvement in our trading performance in recent months has been encouraging, and has been driven by the rapid recovery in leisure travel, with business related travel recovering more slowly. The second half has started well with sales strengthening further to an average of circa 83% of 2019 levels in the first six weeks, led by continental Europe and North America where revenues are back to well above 80%, driven by a very strong recovery in domestic and leisure demand. In the UK, sales are back to circa 82% of pre covid-19 levels, with the air sector boosted by strong leisure demand, and the rail business helped by the return of commuters in increasing numbers. In the rest of the world, the picture remains more mixed with strong recoveries in the Middle East, India, Australia and Thailand being offset by very limited travel activity in China and Hong Kong, which we expect to continue in the near term. While there remains uncertainty in the outlook, including from covid-19 and the current geopolitical and macroeconomic situation, we remain confident that we are well positioned for a strong summer period in our key markets, notwithstanding the short-term supply chain challenges being seen across the travel industry as it fully remobilises. Our current expectation is for sales in the second half of the year to be around 80%-85% of pre-covid-19 levels and for full year sales to be in the region of £2.0bn to £2.1bn. While the final profit outturn will be dependent on a number of external factors, including the trajectory of the recovery and inflationary cost pressures, we would expect the full year Ebitda margin (on a pre-IFRS 16 basis) to be between circa 5% (at the lower end of the sales range) and circa 6% (at the higher end). This is consistent with the previously indicated range of 25% to 30% profit conversion on the reduced sales compared to 2019. Our medium-term expectations for the recovery remain unchanged, which are for a return to broadly pre covid-19 levels of revenue and Ebitda margins (on a pre-IFRS 16 basis). In addition to this, at the end of March 2022, the group had a pipeline of circa 230 secured new units, which it expects to open over the next two years, ultimately adding a further circa £300m of annualised sales. Including this unopened pipeline, the cumulative net gains secured since the end of the 2019 financial year are expected to add circa £500m to annualised revenue by 2025. We believe that SSP is well-positioned to benefit from the recovery in the travel sector and we see many opportunities to drive growth. Should the sales recovery continue to follow our base case scenario, we would have the financial capacity for an additional £425m-£475m of capital investment to drive further business growth and expansion over the medium term.” The company reported revenue of £803.2m for the six months ending 31 March 2022 (2021: £256.7m), up 212.9% versus 2021 (back to 64% of 2019 levels). Underlying Ebitda stood at £14.7m in the period compared with an underlying Ebitda loss of £110.3m in 2021 (both on a pre-IFRS 16 basis). Loss before tax was down to £2.3m from £299.7m the previous year.

Shaftesbury reports strong rebound continuing, hospitality tenants seeing sales up 9% on pre-covid levels: West End landlord Shaftesbury has reported the strong rebound since the lifting of restrictions has continued. The company said footfall continues to improve, building during the week, peaking at weekends and there were growing numbers of international tourists. Occupiers are reporting growing turnover with monthly sales now on average 7% ahead of pre-pandemic levels; hospitality and leisure: up 9% and retail at 4%. Chief executive Brian Bickell said: “The continuing strong rebound in the West End economy since the lifting of pandemic restrictions last summer has continued throughout the period. The patient, long-term stewardship of our high profile, centrally-located ownerships, and the actions we took to support our occupiers and stakeholders through the long period of pandemic challenges, have underpinned the welcome recovery we are now seeing in key operating metrics, earnings per share and net tangible assets. Although covid concerns are receding, new challenges are now coming to the fore, both in the UK and in many other economies, exacerbated by macroeconomic and political issues. While London and the West End cannot be completely sheltered from these headwinds, their global status, appeal and broad-based, dynamic economies should provide a considerable degree of protection, which few other locations can match. With the prospect of an extended period of uninterrupted trading as we enter the important summer season, further enhanced by the improving outlook for international leisure and business travel, the revival in confidence and growth we are now seeing is already providing a firm foundation for the return to long-term prosperity for the West End and our exceptional portfolio.” Shaftesbury said talks remained ongoing with Capital & Counties over a £3.5bn merger that would bring together some of central London’s best known tourist destinations under the ownership of a single company. Net property income in the six months to 31 March 2022 was up 55.1% to £41.1m (2021: £26.5m) reflecting improved occupancy, removal of occupier rental support and significant reduction in charges for impairments and expected credit losses as trading conditions improve. Profit after tax for the period was £247.6m (2021: loss of £338.5m), largely due to revaluation surpluses of £232.9m (2021: revaluation deficits of £342.6m). Shaftesbury has now collected 95% of invoiced rents for the period.

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